Type of life insurance policies - FL Life Insurance
Variable Whole Life insurance is based on what type of premium?
Level fixed (Variable whole life insurance is a level fixed premium investment-based product).
A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?
Level term (A 20 year term policy is written to provide a level death benefit for 20 years).
Which policies does the premium remains level for the term of the policy.
Level term and increasing (Therefore, in the other types of level policies, the first-year premium would not be different from any other year).
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as
The policy contains sufficient cash value to cover the cost of insurance (In universal life insurance, the policyowner may skip a premium payment without lapsing the policy as long as the policy contains sufficient cash value at the time to cover the cost of insurance for that premium period).
Which life insurance guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.
Whole life insurance policies
What occurs in decreasing term policy?
- The face amount steadily declines throughout the duration of the contract - The death benefit is $0 at the end of the policy term - The contract pays only in the event of death during the term and there is no cash value.
Which of the following is NOT one of the three types of term coverage based on what happens to the face amount during the policy term?
Renewable
All of the following are true regarding a decreasing term policy EXCEPT
The payable premium amount steadily declines throughout the duration of the contract. (Premiums remain level with a decreasing term policy; only the face amount decreases).
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Universal Life
Interesting facts about Straight Life policy
- It usually develops cash value by the end of the third policy year - It has the lowest annual premium of the three types of Whole Life policies - The face value of the policy is paid to the insured at age 100
If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?
A full death benefit
Which of the following best describes annually renewable term insurance?
It is level term insurance (Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost).
Which of the following is an example of a limited pay life policy?
Life Paid-up at age 65
Which policy involves face amount decreasing, the premium remaining constant throughout the life of the contracts.
Decreasing policy
Which type of life insurance policy generates immediate cash value?
Single Premium
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
What occurs in level term policy?
- The policy premium will remain level for 20 years - If the insured dies before the policy expired, the beneficiary will receive $100,000. - The policy will expire at the end of 20 year period
The insured is also the policyowner of the whole life policy. What age must the insured attain in order to receive the policy's face amount?
100
about domestic insurers
A domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
Annually renewable term policies provide a level death benefit for a premium that
Increases annually (with the age of the insured)
Like other types of whole life policies, which policy endows for the face amount of the policy if the insured lives until the age of 100.
Single Premium Whole Life (SPWL) (The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer).
An insurance policy that only requires a payment at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called?
Single premium whole life
Which policy requires the entire premium to be paid in one lump sum at the policy's inception?
Single premium whole life
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability. (The policyowner (insured) would need to prove insurability for the amount of the increase).
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value?
Variable universal life
Which life insurance provides protection for the entire lifetime of the insured. If the insured lives to the age of 100, the company pays the face amount of the policy to the policy to the policyowner (usually the insured).
Whole life insurance policies
Interesting facts about whole life insurance
Whole life insurance policies mature when the insured reaches the age of 100. The cash value at the time is scheduled to equal the face amount; therefore, when the insurance company pays the face amount, it also, in effect, pays the cash value.
Which life policies are referred to as permanent protection, since as long as the premium is paid coverage will continue for the life of the insured. Both the premiums and death benefit are guaranteed and will remain level for life.
Whole life policies
Which life policy offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and the living benefits, which include policy loans
Whole life policies
Which life policy is similar to straight life, but endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.
limited-pay whole life policy,
Which policy component decreases in decreasing term insurance?
Face amount (decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term).
Which type of term insurance involves the premium remaining consistent over the years, unlike the premiums of many policies, which increase as the policyholder ages.
Level term
In limited -pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years
Limited Pay Life
About 20 year life policy
Under a 20 pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all the planned premiums are paid, the beneficiary will receive the face amount as a death benefits.
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
required a premium increase each renewal (Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values).
Which of the following policies would be classified as a traditional level premium contract?
Straight Life
Which life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
Straight Life Policy
Which of the following types of insurance would provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources?
Term
What does term insurance provide?
Term death benefits only; (cost per $1,000 of coverage is less than other types of policies that create cash values).
All of the following entities regulate variable life policies EXCEPT
The Guaranty Association
When would a 20-pay whole life policy endow?
When the insured reaches age 100
Which of the following types of policies will provide permanent protection?
Whole Life
In which of the following cases will the insured be able to receive the full face amount from a whole life policy?
If the insured lives to age 100
What is variable life insurance regulated by?
Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.
About variable products
Variable products are governed in part by the Securities and Exchange Commission therefore, agents selling variable life policies must also secure a securities license.
What type of premium do both Universal Life and Variable Universal Life policies have?
Flexible Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, as long as there is enough value in the policy to fund the death benefit.
The death benefit under the Universal Life Option B
Gradually increases each year by the amount that the cash value increases (Under option B the death benefit includes the annual increase in cash value so the death benefit gradually increases each year by the amount that cash value increases).
Which of the following terms best describes the coverage provided by term policies, as compared to any other form of protection?
Greatest (Term policies provide for the greatest amount of coverage for the lowest premium, as compared to any other form of protection).
A return of premium term life policy is written as type of term coverage?
Increasing (Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid).
Variable Products
Insurers selling variable products invest their customer's monies in separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.
During partial withdrawal from a universal life policy, which portion will be taxed?
Interest (During the withdrawal, the interest earned on the withdrawn cash value may be subject to taxation).
An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
It will increase because the insured will be 5 years older than when policy was originally purchased. (The premium will remain level during the entire level premium term policy period. if the policy renews at the end of the term, the premium will be based on the insured's attained age the time of renewal).
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
Limited Pay Life
in which policy does the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years?
Limited Pay policies
Which policy does the policyowner have the flexibility to increase the amount of premium going into the policy and to later decrease it again? The policyowner may even skip paying a premium, and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.
Universal Life Policies
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
Universal life
An individual had just borrowed $10,000 from his bank on a 5 years installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
Decreasing term (A decreasing term policy's face amount decreases as the amount of debt is reduced).
What does "level" refer to in level term insurance?
Face Amount (level term policies maintain level death benefit (or face amount) throughout the term of the policy).
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid
For 20 years or until death, whichever occurs first
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
SEC registration
If an agent wishes to sell variable life policies, what license must the agent obtain?
Securities
A domestic insurer issuing variable contracts must establish one or more
Separate accounts
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments
About Survivorship Life
Survivorship Life is much the same as joint life in that it insurers two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefits is not paid until the death, the joint life expectancy in a sense is extended, resulting in lower premium than which is typically charged for joint life.
what is the annuitization period?
The "annuitization period" is the time during which accumulated money is converted into an income stream. It is also referred to as the annuity, liquidation or pay out period.
What are the two components of universal policy?
an insurance component (or the death protection) and cash account. (The insurance component of a universal life policy is always annual renewable term insurance).
The death protection component of a universal life policy is always ?
annual renewable term insurance
which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
depreciation period
Which of the following is NOT true regarding the annuitant?
The annuitant cannot be the same person as the annuitant owner
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Universal Life - Option A
An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?
$100,000 (In joint life policies, the death benefit is paid upon the first death only).
About registration
Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.
The minimum interest rate on an equity indexed annuity is often based on
An index like Standard & Poor's 500
The LEAST expensive first-year premium is found in which of the following policies?
Annually Renewable Term
Which policy is the purest form of term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age.
Annually renewable term
A universal life insurance policy is best described as a /an
Annually renewable term policy with a case value account
When an annuity is written, whose life expectancy is taken into account?
Annuitant
when an annuity is written, whose life expectancy is taken into account?
Annuitant
Who receives payments from an annuity and is the person whose life expectancy is considered when writing the contract?
Annuitant (The annuitant an annuity owner are often the same person but do not have to be).
In an annuity, the accumulation money is converted into a steam of income during which time period?
Annuitization Period
Which of the following is INCORRECT regarding a $100,000 20-year level term policy?
At the end of 20 years, the policy's cash value will equal $100,000. (Term policies do not develop do not develop cash values. All the other statements are true).
What of the following is a feature of a variable annuity?
Benefit payment amounts are not guaranteed.
What license or licenses are required to sell variable annuities?
Both a life insurance license and a securities license
Which of the following features of the Indexed Whole Life policy is NOT fixed?
Cash value growth
Which insurance is changeable without proof of insurability up to the full death benefit. The premium for the permanent for the permanent policy will be based on the insured's attained age.
Convertible term insurance
Which term insurance gives the policyowner the right to convert the policy to a permanent insurance policy without evidence of insurability.
Convertible term insurance
What characteristics makes whole life permanent preotcetion?
Coverage until death or age 100 (As long as the premium is paid coverage will continue for the life of the insured or till the insured's age 100).
What is another name for interest-sensitive whole insurance?
Current assumption life (Interest-sensitive whole life, also referred to as current assumption life, is whole life policy that provides a guaranteed death benefit to age 100).
An individual had been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it?
Deferred
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation period
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount (If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater).
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Either the amount paid into the plan or the cash value of the plan, whichever is the greatest amount.
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)
Equity Indexed Annuity
An agent selling variable annuities must be registered with
FINRA
A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type is annuity products are they likely to use to provide these benefits?
Immediate annuity (An annuity purchased with a single lump- sum payment, with a 25 year fixed period distribution will be most suitable for this arrangement.
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an
Interest-sensitive Whole Life (Because the cash values are generated by investments, interest rate will affect the amount of the cash value).
Which of the following is NOT true regarding the accumulation period of an annuity?
It would not occur in a deferred annuity.
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?
Joint Life (A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death).
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
Joint Life Policy (Joint Life Policy cover the lives of two insured's rates are blended, Upon the death of the first insured, the policy ends).
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
Which universal life option involves the death benefit remaining level while the cash value gradually increases?
Option A (The death benefit will increase at the later date in order to maintain a gap between the cash value and the death benefit before the policy matures).
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
Option B Option B the death benefit includes the annual increase in cash value so that death benefit gradually increased each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
Which of the following has the right to convert the existing term coverage to permanent insurance?
Policyowner
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is True?
The beneficiary will receive the greater of the money paid into the annuity or the cash value.
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE?
The beneficiary will receive the greater of the money paid into the annuity or the cash value. (If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan into the plan or the cash value, whichever is greatest).
All of the following are true of an annuity owner EXCEPT
The owner must be the party to receive benefits (The "owner" is the person who purchases the contract and has all of of the rights such as naming the beneficiary and surrounding the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different fro, the owner) or the beneficiary).
all of the following are true of an annuity owner EXCEPT
The owner must be the party to receive benefits.
Which of the following determines the cash value of a variable life policy?
The performance of the policy portfolio (The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer).
which of the following best describes what the annuity period is?
The period of the time during which accumulated money is converted into income payments.
Who is an annuitant?
The person on whose life expectancy the annuity is written and who receives benefits from the annuity
About Index whole life
Under the Indexed Whole Life policy, the premium is fixed, and the death benefit is guaranteed. Cash value is dependent upon the performance of the equity index although a minimum cash value is guaranteed.
Which policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS?
Universal Life Option A (Level Death Benefit option) If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
What is the difference between variable and term insurance policies?
Variable universal life policies have cash value, so they allow policy loans. Term insurance policies do not have cash value.
which of the following is TRUE regarding the accumulation period of an annuity?
it is a period during which the payments into the annuity grow tax deferred.
which of the following is another term for the accumulation period of an annuity?
pay-in period
which of the following is called a "second-to-die" policy?
survivorship life (last survivor) is the same as joint life. It insures two or more lives for a premium that is based on a joint age.
what is the annuitization period ?
the "annuitization period" is the time during which accumulated money is converted into an income stream. It is also referred to as the annuity, liquidation or pay-out period.
The president of a company is starting an annuity and decides that hie corporation will be the annuitant. which of the following statement is true?
the annuitant must be a natural person
Which policies are all paid by the time insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.
Limited pay whole life premiums
There are several types of whole life policies. Name the first three:
Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life. (Level term is a type of term insurance).
Which policies charges a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit?
Straight life policies
Which policy has a level guaranteed face amount and a level premium for the life of the insured?
Straight whole life policy
Which of the following would help prevent a universal life policy form lapsing?
Target premium
For variable products, underlying assets must be kept in
A separate account (Under a variable life insurance policy, assets must be placed in a separate fund, used primarily for the investment of stocks, bonds, and other security investment options).
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
Decreasing Term (A decreasing term policy's face amount decreases as the amount of debt is reduced).
Which of the following types of policies allows the policyowner to skip premium payments , provided that there is enough cash value in the policy to cover the premium amount?
Universal Life
Variable Products
- The minimum death benefit is guaranteed - The cash value is not guaranteed - Policyowners bear the investment risk
Which statement is NOT true regarding a Straight Life policy?
Its premium steadily decreases over time, in response to its growing cash value.
An insured purchased a variable life insurable life policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out?
$50,000 (The cash value of a variable life insurance policy is not guaranteed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed benefit amount).
Which of the following statements is correct regarding a whole life policy?
The policyowner is entitled to policy loans
All of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account (Insurer's selling variable products invest their customer's monies in separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk).
Which of the following best defines target premium in a universal life policy?
The recommended amount to keep the policy in force throughout its lifetime (The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime).
What is the purpose of establishing the target premium for a universal life policy?
To keep the policy in force (The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime).
Which of the following is a key distinction between variable whole life and variable universal life products?
Variable whole life has a guaranteed death benefit.
Which policy allows for policyowners to withdraw a limited potion of the policy's cash value?
Universal Life policy (Each withdrawal, however, is usually charged, and the amount and frequently of withdrawals are usually limited).
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be
Adjusted to the insured's age at the time of renewal. (If a level term product is renewed at the end of the term period the premium will be based upon the attained age of the insured).
Which of the following is NOT a type of whole life insurance?
Level term
What are the three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term?
Level, Increasing, and Decreasing (regardless of the type of term insurance purchased, the premium is level throughout the term of the policy).
Which of the following is True regarding the premium in term policies?
The premium is level for the term of the policy. (Only the amount of the death benefit may change. This doesn't apply to annual renewable term insurance, in which the premium increases annually according to the attained age).
What kind of policy allows withdrawals or partial surrenders?
Universal life (Universal life products allow the partial withdrawal, or surrender, of the policy cash value).
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Limited pay whole life (Premium payments will cease at her age 65, but coverage will continue to her death or age 100).
